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Macquarie, Texas Pacific lead bid for Qantas by Sonali Paul
8:07 PM MELBOURNE/SYDNEY, Nov 22 (Reuters) - Investment bank Macquarie Bank Ltd. <MBL.AX> and private equity firm Texas Pacific Group have proposed to buy out Australian airline Qantas Airways Ltd. <QAN.AX>, pushing its shares up as much as 21 percent.
"The approach is confidential and incomplete and is being investigated by Qantas," Qantas said in a statement, after a newspaper reported that a Macquarie-led buyout possibly worth A$10.3 billion ($7.9 billion) was in the works.
A Qantas spokesman said the company could add nothing further to its statement.
Qantas shares soared to a record high of A$5.25, and last traded up 16 percent at A$5.05, valuing the group at A$10 billion.
"This has come as a complete surprise as it is not the usual candidate for private equity," said James Holt, a portfolio manager with Zurich Financial Services, which holds about A$10 million worth of Qantas shares.
Holt did not say at what price his fund would be a seller of Qantas shares, but said they had turned expensive.
"If Qantas was trading at this price in the market we would have been a seller, but given that it is in play now, you will have to keep your options open."
Two analysts said the market was speculating on a bid at A$5.50 a share, which would value Qantas at A$10.9 billion.
JP Morgan analyst Matt Crowe said Qantas directors would probably want more than A$5.50 a share.
"It's going to be very difficult to get over the line," he said.
COMPLEX PLAN
The deal, although fraught with political difficulties, would involve Macquarie and associates taking a 25 percent stake in Qantas, other Australian investors taking 25 percent, Qantas senior management being asked to take 1 percent and international players led by Texas Pacific, taking the rest, the Australian Financial Review newspaper said.
That mix would allow the consortium to get around ownership restrictions that limit one individual entity to no more that 25 percent of the airline, and international interests collectively owning no more that 49 percent.
To protect landing rights at airports around the world, Qantas must remain majority-owned by Australians, as take-off and landing rights are negotiated between countries.
Buying an airline would be unusual for Macquarie as well as private equity investors, as airline earnings are more volatile than the businesses they normally pursue.
"Being a cyclical business, the multiples won't be high as they are prepared for pay for supermarkets and things like that," said Zurich's Holt.
JP Morgan's Crowe said compared to most international airlines, Qantas might make a better candidate for private equity investors as it has a stable domestic business fuelling half its earnings, with only one rival, Virgin Blue Holdings Ltd. <VBA.AX>.
Based on what the newspaper reported, analysts said Macquarie might sell Qantas planes into Macquarie's leasing business and put Qantas's terminal assets into Macquarie Airports <MAP.AX>.
"Qantas is already a pretty well run business, so I wouldn't have thought there were lots of opportunities to take costs out. There will be some," said an analyst at a fund management firm, who declined to be identified.
Qantas said that it had talked to a range of individuals and companies, including airlines, on possible partnerships, joint ventures and acquisitions over the past several years. ($1=A$1.30) (Additional reporting by Denny Thomas, Richard Pullin and James Thornhill) #
8:07 PM MELBOURNE/SYDNEY, Nov 22 (Reuters) - Investment bank Macquarie Bank Ltd. <MBL.AX> and private equity firm Texas Pacific Group have proposed to buy out Australian airline Qantas Airways Ltd. <QAN.AX>, pushing its shares up as much as 21 percent.
"The approach is confidential and incomplete and is being investigated by Qantas," Qantas said in a statement, after a newspaper reported that a Macquarie-led buyout possibly worth A$10.3 billion ($7.9 billion) was in the works.
A Qantas spokesman said the company could add nothing further to its statement.
Qantas shares soared to a record high of A$5.25, and last traded up 16 percent at A$5.05, valuing the group at A$10 billion.
"This has come as a complete surprise as it is not the usual candidate for private equity," said James Holt, a portfolio manager with Zurich Financial Services, which holds about A$10 million worth of Qantas shares.
Holt did not say at what price his fund would be a seller of Qantas shares, but said they had turned expensive.
"If Qantas was trading at this price in the market we would have been a seller, but given that it is in play now, you will have to keep your options open."
Two analysts said the market was speculating on a bid at A$5.50 a share, which would value Qantas at A$10.9 billion.
JP Morgan analyst Matt Crowe said Qantas directors would probably want more than A$5.50 a share.
"It's going to be very difficult to get over the line," he said.
COMPLEX PLAN
The deal, although fraught with political difficulties, would involve Macquarie and associates taking a 25 percent stake in Qantas, other Australian investors taking 25 percent, Qantas senior management being asked to take 1 percent and international players led by Texas Pacific, taking the rest, the Australian Financial Review newspaper said.
That mix would allow the consortium to get around ownership restrictions that limit one individual entity to no more that 25 percent of the airline, and international interests collectively owning no more that 49 percent.
To protect landing rights at airports around the world, Qantas must remain majority-owned by Australians, as take-off and landing rights are negotiated between countries.
Buying an airline would be unusual for Macquarie as well as private equity investors, as airline earnings are more volatile than the businesses they normally pursue.
"Being a cyclical business, the multiples won't be high as they are prepared for pay for supermarkets and things like that," said Zurich's Holt.
JP Morgan's Crowe said compared to most international airlines, Qantas might make a better candidate for private equity investors as it has a stable domestic business fuelling half its earnings, with only one rival, Virgin Blue Holdings Ltd. <VBA.AX>.
Based on what the newspaper reported, analysts said Macquarie might sell Qantas planes into Macquarie's leasing business and put Qantas's terminal assets into Macquarie Airports <MAP.AX>.
"Qantas is already a pretty well run business, so I wouldn't have thought there were lots of opportunities to take costs out. There will be some," said an analyst at a fund management firm, who declined to be identified.
Qantas said that it had talked to a range of individuals and companies, including airlines, on possible partnerships, joint ventures and acquisitions over the past several years. ($1=A$1.30) (Additional reporting by Denny Thomas, Richard Pullin and James Thornhill) #
